Tupper Lake school budget likely to dip into reserves and exceed tax cap

TUPPER LAKE – The Tupper Lake Central School District will likely have to dip into its reserves and exceed its tax cap in order to be solvent in the 2013-14 school year.

District Superintendent Seth McGowan outlined the problem for the school board at a special meeting Tuesday night.

Despite the fact that the district will get $268,134 more from the state than originally expected, it won’t be enough to make up for the projected deficit in next year’s budget. It brings the district’s total state aid to about $7.8 million.

McGowan said he and district Business Manager Garry Lanthier got total spending in the 2013-14 budget down to $17.4 million, which represents a 8.68 percent increase over the current year’s budget. They started the budget process this year with an 11.4 percent increase.

The district is allowed to increase its tax levy by 4.76 percent over the current year’s tax levy of $7,312,600. That means it is allowed to increase by $348,080 and stay within the state-imposed tax cap.

Any more than that will require a supermajority of voters, or 60 percent of them, to approve the budget rather than just a simple majority. Just over half of the school districts in the state that proposed budgets exceeding their tax cap last year saw them pass.

Adding together the district’s total income sources for next year, including $7.8 million in state aid, $7.3 million in the current levy, and $993,800 in other income, McGowan came up with a total of $16.12 million. With total spending in the budget at $17.4 million, there’s still $1,277,168 that has to be raised. That’s a $929,088 difference between the allowable tax cap and what is needed to fulfill the proposed budget, he said.

“That’s a little bit of an issue, and we’re looking at ways to overcome that,” McGowan said.

He said there are several avenues that could be explored for more income.

The district could explore ways to get more state aid, McGowan said. He said there’s a chance that the district could get special legislation giving it more money, as there is some buzz about Tupper Lake’s financial situation in Albany right now, but he sees that as unlikely.

There are also potential other non-traditional sources of income, like donations. McGowan said those are unlikely as well, but the district continues to explore its options.

School board President Dan Mansfield mentioned in another conversation Tuesday night that several school officials met with Adirondack Club and Resort representatives about the school district’s financial troubles because the developers were concerned about the draw of a community with a failing school. He didn’t connect that discussion with the idea of donations to the district, though.

Another option is to deplete the district’s reserves and fund balances, McGowan said. There is currently $500,000 in the district’s Employee Benefits Accrued Liability Reserve and $200,000 in its unemployment reserves; $410,000 in its appropriated fund balance, which goes to offset taxes each year; and $500,000 in the district’s unappropriated fund balance, which is kept in case of emergencies or other unexpected expenses. That last balance has been diminishing in recent years and is lower than usual, McGowan said.

The district could use the $700,000 from its two reserve funds, with permission from the state education commissioner, and put it toward the budget, and it could take another $229,088 from next year’s appropriated fund balance, McGowan said.

That would leave the district in a pickle for the 2014-15 school year, with only $180,912 going into an appropriated fund balance and no retirement or unemployment reserves, McGowan said. That would start the 2014-15 school year’s budget with a $1.35 million deficit already, but it would get the district through the next school year.

“It may be our only option,” McGowan said.

McGowan noted that all the options he presented are not long-term solutions, and they are all based on staying within the tax cap.

McGowan called his discussion of fund balance and reserve options unprecedented and said those things wouldn’t normally be talked about in such detail at any school board meeting across the state. But he said it was in response to talk throughout the community that the district’s budget problems are being trumped up.

“I’ve heard discussion that our situation is possibly being exaggerated in order to pass the budget,” McGowan said. “And you know, what I would say is you couldn’t ask for a more open and transparent look at Tupper Lake’s situation as you’re going to get tonight. And my hope is that at the conclusion there’ll be no doubt in anybody’s mind that the situation I’ve been warning about and trying to prevent for four years is actually upon us at this point.”

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Board members react

McGowan asked school board members what they thought should be the district’s course for the future.

“It’s a bleak outlook,” Mansfield said.

Several board members said they don’t want to rely on any more state money coming in.

Mansfield said he doesn’t believe spending all the district’s reserves at this time is a good idea, so he wants to see a more balanced plan that includes some reserve spending and a tax levy that exceeds the tax cap but stays under a 10-percent increase.

Board member Mark Yamrick asked if there was anything else that could be cut on the revenue side of the ledger.

He noted that the district imposed drastic cuts several years ago, laying off about a quarter of its instructional staff, and it recoiled from those cuts in the following years because they hurt the district’s programs too much.

Lorraine Lewis, a Piercefield resident who attended the meeting, asked the board why it can’t downsize spending in the district more to match the reduction in the number of students. She produced an Enterprise story that compared budget increases in the four Tri-Lakes school districts. It showed Tupper Lake’s budget increasing 4.3 percent and 7.9 percent in 2010-11 and 2011-12, compared to smaller increases in the other districts.

“That’s exorbitant,” Lewis said.

Mansfield said that the significant round of layoffs several years ago downsized the district to the point where it now matches enrollment numbers.

When Lewis pushed the topic, Mansfield told her that he didn’t want to get into a discussion with the public about the budget.

“You need to go see our district clerk about this type of question,” Mansfield said.

Board member Paul Ellis, who is also the Saranac Lake village treasurer, said municipalities all over the state are going through the same problems with the state’s tax cap.

He said he’s been concerned to see that Tupper Lake’s schools have been cutting everything to keep tax increases low, and he believes that taxes will need to increase in order to make the school district attractive to people who are considering moving there. He noted that if the ACR is successful, people will be looking at the quality of the school when they are thinking about buying property in Tupper Lake.

“If we allow the district to continue to deteriorate, we’re only sealing our fate,” Ellis said. “It’s time to change that method of thinking and time to start funding what we need to provide to our students.”

Ellis asked about a few spending areas that might be able to be reduced outside of educational programming, like the cafeteria and transportation, but McGowan and Lanthier said there isn’t much leeway in those areas.

“We’ve had some big cuts in support staff,” Lanthier said.

He also asked whether the district could use distance learning more to keep educational programs in place. Interim middle/high school Principal Matt Southwick said the district is already using about as much distance learning as it can to keep up programming that was cut in the last few years.

“I just think we’re left with very few alternatives at this point in time,” Ellis said. “We’re preparing these kids for the rest of their lives. There’s no job more important than that, other than being a parent.”

Ellis said he’d like to see the tax increase kept below 9.5 percent.

Board member Dawn Hughes said that the district doesn’t usually talk about contractual expenses like health insurance much, because they are difficult to change, but she said she would like school officials to ask the unions if they might consider more of a health insurance contribution.

She noted that as a state employee, she’s had to increase her health insurance contributions over the last few years, and she believes Tupper Lake’s teachers contribute less than state workers. Teachers in Tupper Lake currently contribute 10 percent of their health insurance costs.

Hughes said she is constantly approached by members of the public asking her why teachers don’t contribute more to their health insurance. Two people in attendance at the meeting – including Lewis – applauded that comment.

“This is a big amount of money for the district to be paying,” Hughes said.

Mansfield said he and McGowan will meet with union representatives and see if that’s an option.

The district has to adopt a budget by April 26. There is a budget workshop planned for April 22, and McGowan said he will try to bring a new plan to the board at that time so board members can evaluate it and fine-tune it before it needs to be approved.